The US-China Tensions over Digital Decoupling: How Far Does it Seem?

Dyuti Pandya,

Research Intern,

Indian Society of Artificial Intelligence and Law.


Nayan Grover,

Junior Associate Editor,

The Indian Learning.


William Safire in an opinion piece for the NY Times in 2000 elicited how he asked Richard Nixon on asking if they went overboard with selling the American public on the political benefits of increased trade [with China]. To this Nixon replied that he was not as hopeful as he had once been and maybe America might have created a Frankenstein in the process. And this is a scenario we all are witnessing in the time of Trump’s presidency. The economic war between the US and China has plunged and escalated into a political dispute, severing the ties that were once cordial. The whole ordeal of the collateral damage of US-China decoupling is spreading widely. This is interesting to note because India and China ties have gotten severed too, to which the Indian government recently banned 59 Chinese mobile apps including TikTok. The reason cited was of concerns regarding data security issues, and this something which the US is on the road to do. Although instead of a casual ban, the Trump presidency is urging Byte Dance, the company owning TikTok to hand over the business to Microsoft. While this may be a part of the digital decoupling, we all are witnessing the reasons that led to the decoupling of the world’s top two economies have resulted in a direct economic and political conflict. The reasons that can be cited include rising costs in china, increased automation and the growing anger at Beijing's appropriation of intellectual property in exchange for access to its market. This has made the western companies start looking for alternatives to China. Taking over Byte Dance is just one of the recent surfacing anthologies. The others include punitive tariffs placed by the US on about $370 bn worth Chinese imported goods, followed by US's accusations on Chinese telecom maker Huawei Tech being an accomplice on helping spy China on its enemies, another one is Beijing's move to impose a security law on Hong Kong, US sanctions on Chinese individuals linking the human rights abuses against some community groups, territorial disputes in the South China Sea. All these developments have pulled the two superpowers apart and it's only getting worse with the unprecedented decisions taken by the USA.

Although on the brighter side, if TikTok gets acquired by Microsoft, it would legit be an interesting example of how a successful commercial relationship between US-China has been disentangled. This is because the funds raised by Byte Dance did come from the USA. Byte Dance can be considered as an A.I. company. And the nature of building A.I. is that the more data you have, the better your algorithms generally are. And if Microsoft manages to acquire the whole company, it can be considered as a starting point in the AI technocratic evolution for the US.

The developments surrounding TikTok amid the tension can be regarded as one of the "underlooked risk" for the global economy, as stated by Simon Baptist, global chief economist at the Economist Intelligence Unit.

The whole bifurcation is about regulations circling the whole digital entity and thereby being the wedge to cause more problems between the US and China. Furthermore, TikTok has been an issue for some time now and this came into highlight last fall when an investigation was called into the company. The reports from Washington Post revealed that at one time TikTok had instructed its own moderators to censor any videos which would be considered sensitive by the Chinese Government. And furthermore, it has also been stated that Trump has an ongoing personal quibble with TikTok. This has been reported as a source for inflating the confirmations to attend the election rally in Tulsa, Arizona. The empty stands proved as a setback for Trump's campaign.

It might be a personalized version for Trump which he derailed into a political situation for the whole of USA, but it can be considered in sync with what stand India took towards decoupling from China and the initiation of a new structured framework for digital engagement with trusted political economies.

Microsoft has agreed to oblige with the decision taken by Trump and has promised to meet all the national security concerns that might arise during the process. So, let's say that Trump manages to get his way, but this doesn't mean the viability of commercial interest for Microsoft will help stabilize the tech giant's absence and furthermore win the youthful population. This is similar to when the Trump administration persuaded its allies to abandon Huawei.

One needs to question if this tension will considerably subside if Joe Biden wins the presidency in November? If not, then the US tech companies and Hollywood will need to get familiarized with the new political terrain soon to be established in the US. Furthermore, Trump is in absolute power to shift the entire political spectrum and change the policies against China is something which would be difficult to reverse for the next President. Furthermore, the rise of bipartisan US political support for the industries might bring a new shift in the technological and economic evolution. This new state in Washington seems to have arisen in context to the rising Chinese digital threats.

All these tensions amid the two economies have been overshadowing the trade agreement that was meant to have drawn a line for the trade war. It was supposed to have been a promoting initiative to boost the business transactions between the two superpowers. Instead, all these differences have surged into something grave and are only widening further. This is important to highlight and taken into consideration because of the very fact that the world economy is at its worst crisis currently, the last such crisis was seen during the Great depression.

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